Credit Unions

Torsten Bell Excerpts

Wednesday 16th July 2025 Westminster Hall

[The Parliamentary Secretary to the Treasury (Torsten Bell)]

It is always a pleasure to serve under your chairmanship, Mr Twigg. I start obviously by congratulating my hon. Friend the Member for Cumbernauld and Kirkintilloch (Katrina Murray) on securing this important debate and speaking so powerfully about the role of credit unions. The interest in this topic, particularly on this side of the House and for some parts of the country, shows how important credit unions are in supporting individuals and communities. The same commitment and motivations underpin the Government’s strong support for credit unions and the mutuals sector more widely, as the Opposition spokesperson just mentioned.

As a country, we have a rich history of mutuality. In 1775, Richard Ketley founded the world’s first ever building society in Birmingham, and that continues in the west midlands today, as we heard from my hon. Friend the Member for Wolverhampton North East (Mrs Brackenridge). The modern co-operative movement was also British-born, albeit slightly further north, in Rochdale.

Today we are here to discuss credit unions, which are deeply embedded in our local communities. Everyone in this Chamber passes on our thanks to Beth, who the hon. Member for Wokingham (Clive Jones) talked about so powerfully in his remarks. Before I turn to the important points that colleagues have raised specifically about credit unions, let me say a few words about the Government’s strong support for the mutual sector, as the Opposition spokesperson has raised it.

Mutuals have a footprint in high streets around the country and they provide jobs. They strengthen their communities, and they support people to build savings habits and access affordable credit and mortgages. Growth in the mutual sector means growth that touches all levels of society, aiding economic participation in the broadest possible sense, as my hon. Friend the Member for Glasgow North East (Maureen Burke) set out. That is why the Government have committed to doubling the size of the sector.

I am glad that the Opposition spokesperson has been paying attention to all the Government’s commitments and the change that we were elected to bring. In south Wales, building society branches are expanding in some areas, even as banks are stepping back. We have already begun to make our commitment a reality, not least when it comes to credit unions, whose lending is growing, even though, as several hon. Members have mentioned, the number of credit unions has fallen in recent years.

In her November Mansion House speech, the Chancellor announced new measures to support the growth of credit unions and mutuals. The shadow Minister would be keen to have the Chancellor give an even longer speech at every Mansion House, but she cannot reiterate all her greatest hits at every single one. We did not let people away till after 10 o’clock last night as it was, and there is such a thing as decent human behaviour. The measures included publishing a call for evidence on the potential to reform common bonds for credit unions in Great Britain, asking the Financial Conduct Authority and the Prudential Regulation Authority to produce a report on the mutuals landscape by the end of this year, which is now well under way, and welcoming the establishment of an industry-led mutual and co-operative business council, which has a live workstream specifically exploring the role of the credit union sector.

The common bond is a unique feature of a credit union. It fosters trust and accountability among members. However, there has been a long-standing request from the sector that the Government review the common bond, and that was reiterated by my hon. Friend the Member for Wolverhampton North East this morning. That is why we put out the call for evidence. I thank everyone who fed into that process, including individual credit unions, trade associations and some Members here today. We are now engaging with the sector and the regulators on those responses and are considering next steps. The Government and the Economic Secretary to the Treasury will provide an update on that work in due course.

More widely, all Members who have spoken today, including my hon. Friend the Member for Airdrie and Shotts (Kenneth Stevenson), recognise the role that credit unions play in achieving financial inclusion, more broadly considered. They provide access to financial services and products and allow people to participate in the economy.

The hon. Member for Wokingham asked about the long-standing calls for a fair banking Act. I gently note that there was little progress on that in the five years in which the Liberal Democrats were part of the UK Government. That tends to get slightly forgotten. When I spend time here in Westminster Hall—as was pointed out earlier, I do spend a lot of time here—I am told about long-standing Liberal Democrat policy in a whole range of areas.

The answer to the hon. Gentleman’s question is that our focus is on taking forward a financial inclusion strategy under the Economic Secretary to the Treasury. I know she will want to work with my hon. Friend the Member for North Ayrshire and Arran (Irene Campbell) in her new role—I congratulate her on it. That work is being supported by a committee of consumer groups and industry representatives, including Fair4All Finance, which has a key role in supporting the sector. That strategy will be published later this year and will seek to tackle a range of barriers facing individuals in accessing financial services, including banking and affordable credit. More importantly, it will consider what more the industry and the Government can do to address these issues.

The financial inclusion committee has recommended that the financial inclusion strategy focus on helping people build an emergency savings buffer—a pot of money that could help them replace a household appliance or repair a car. One area we are exploring is payroll saving schemes, which several Members have called for, which are offered by employers to staff. In my day job of dealing with the pensions landscape, people are talking about learning from the experience of automatic enrolment, and a number of credit unions already deliver such schemes. We talked about the role of a particular credit union earlier.

The Government are directly encouraging those on lower incomes to save via help to save, introduced under the previous Government. Although the scheme has been effective for those who use it, I think we would all say that take-up has been low. In April, eligibility was extended to all universal credit claimants in work, meaning that about 3 million people will be able to benefit from the scheme.

More widely, we are continuing to monitor the availability of affordable credit as part of that financial inclusion strategy work. The Treasury engages regularly to understand the current barriers faced by the mutual sector and credit unions specifically, and to identify opportunities for growth. There have been several discussions about credit union service organisations. That is an important development. The PRA is consulting on how we can facilitate that, given its role in the growth of the sector.

The hon. Member for Strangford (Jim Shannon) asked about growth. He is obviously well aware that the policy area is devolved to Northern Ireland, but he can see the legislation that is being progressed here. We are always happy to engage with our opposite numbers in the Northern Ireland Executive, and we do indeed do so. I join him in celebrating the growth in Northern Ireland. He might not like the progress on the legislative side, but on actual lending and members’ engagement, those of us in other parts of the United Kingdom have a lot to learn.

My hon. Friend the Member for Glasgow North (Martin Rhodes) asked wider questions about bank finance regulation—not least about buy now, pay later. I hope he is happy that the legislation that has long been promised was introduced just a few weeks ago. A few Members who are taking part in this morning’s debate were present in that Committee.

More widely, hon. Members rightly said that credit unions have a different regime from mainstream providers when it comes to regulation. I assure my hon. Friend the Member for Cumbernauld and Kirkintilloch that we are really clear about the differential requirements, including capital requirements and exemptions from consumer credit regulations. We maintain those different regimes for good reasons: we want a proportionate system for different parts of our financial sector.

My hon. Friend has consistently raised concerns about the Financial Ombudsman Service’s approach to handling certain complaints against credit unions, and about the volume of complaints more generally. Although they are a very small part of the Financial Ombudsman Service’s work, I appreciate that is not how it feels for the credit unions wrestling with them. We have heard those complaints, and we recognise the risk of a chilling effect on credit union lending. That is why we have acted. In the March regulation action plan, the Government announced that the Economic Secretary would lead a review of the FOS to examine whether it is delivering on its role.

Today’s debate is well timed. Yesterday the Chancellor launched a consultation on a significant package of policy proposals. That will run until October and I encourage all Members to engage with it. As the Chancellor set out at the Mansion House, the Financial Ombudsman Service will be returned to its original role as a simple, impartial dispute-resolution service, which quickly and effectively deals with complaints. Directly addressing the central point made by my hon. Friend the Member for Cumbernauld and Kirkintilloch, the Government propose to reform the legislative framework that the FOS operates in to stop it acting as a quasi-regulator. We will take steps to provide greater regulatory coherence with the FCA. Consumers and industry will benefit from a more consistent and predictable regulatory environment, and I encourage my hon. Friend and credit unions with recent exposure to and experience of the ombudsman to feed into the consultation over the summer.

In conclusion, the Government recognise the important role that credit unions play in our economy: helping individuals, strengthening communities, and as a major player in any attempt to make our society and economy genuinely financially inclusive. I see that in Swansea, not least in the work of the Celtic credit union. We remain absolutely committed to supporting the growth of the credit union sector now and into the future. I thank all hon. Members who have spoken in today’s important debate.